Wharton Chapter 10

In the case of Kinght-Ridder and other news organizations, investing and losing money in one emerging technology will likely put them at a disadvantage when the next, possibly successful emerging technology comes along. Being burned by one technology can make a firm gunshy about the next transforming technology. How can a firm be aggressive but also remain conservative when it comes to technology adoption at significant costs?

One way would be to watch other industries. No one industry exists in a vacuum, and technology adoption in other industries can be a leading indicator as to what might be down the road. For example in the early 2000s, it was obvious that the internet was becoming home to more and more e-commerce. Financial firms could see that news was making its way onto the internet, so the natural progression would be financial news and actual real-time (almost) stock quotes, and then eventually utilizing the real-time information to make trades online.

An alternative to this would be to work to see several different futures and prepare for any or all of them. That would put the firm in a better position to make changes to remain competitive. Referred to in the book as scenario planning.

Another alternative would be to not wait to see where the industry is going, but be proactive and make your own future and be a market leader. I think the video game market in the late 1970s is a good example of that. Until the release of the Atari 2600 in 1977, home video game systems were designed around a single game or type of game, usually pong or a tennis variant. Each console system had the game or games built right into the console. Atari's release of a game system with interchangable games was a breakthrough. Atari broke from the norm and took an overwhelming lead in the home video game market for years until Nintendo stole the show in 1985.

The 10 "basic" steps to constructing scenarios aren't so basic. Here is a sample scenario for a firm looking to enter the personal aircraft market in hopes that light aircraft will soon compete and possible replace cars:

1. Define issues: Congested roads, people tired of long commutes. Recreational flying. Customer group would be upper class people with disposable income until competitors came in and prices began to fall.

2. Stakeholders: Auto manufacturers and dealerships. What will they do to compete better against a completely new threat? Automated road systems? Larger investment in alternative fuels? Government who would now need to regulate additional air traffic for safety concerns. Current role is that of extreme power in regards to the expansion of these types of technologies due mainly to public safety issues.

3. Forces shaping future: Desire for faster, more efficient (timewise) transportation. Access to larger geographic radius in reasonable amount of travel time. Travel freedom. Population increases putting more stress on existing road systems.

4: Trends/Predetermined elements: Trend in smaller, lighter personal aircraft with prices approaching more affordable levels. No longer need to be extremely wealthy to own and maintain aircraft. Prices of real estate within driving distances of attractive job markets. Population becoming more educated and likely able to absorb flight training within safe levels.

5. Key uncertainties: Government regulations, airspace restrictions. Additional load on air traffic controllers. Takeoff/landing/parking facilities to accomodate additional air traffic when on the ground. Fuel prices - aircraft may be more affordable but burning 10-12 gallons per hour will more than offset any savings. General acceptance - Will people feel safe enough flying themselves around? Safety of lower cost aircraft.

6. 2 most important key uncertainties: 1. Government regulation in the face of increased demand on current air travel system. Aircraft designs may be dictated by FAA or other new government oversight department leaving firm's current design unusable with a sizable lost investment. 2. Infrastructure to accomodate personal aircraft in locations convenient to users' home. Where are these planes going to be parked? Serviced? Refuled? Disposed of?

7. Internal consistency: Main future trends are mutually consistent with each other. Trends point to alternative to land based vehicles to take advantage of all unused available airspace. Outcomes for key uncertainties can coexists. Favorable government regulation could play major part in pushing for compatible infrastructure.
Scenario 1: Government regulation of aircraft is favorable to aircraft manufacturers and end users causing several players to enter the market which drives infrastructure change to accomodate additional acceptance by the public and businesses. Our firm manufactures several models and is a viable competitor in the market.
Scenario 2: Government regulation is not favorable and/or drives prices of aircraft up and prices majority of potential customers out of market. As result, infrastructure is not put into place and air travel does little to compete with automobiles. In that case, firm turns market toward higher end aircraft for business and pleasure use only.

8. Assess scenarios: Scenario 1. Stakeholders such as auto manufacturers would certainly be threatened by favorable government regulation. These firms may purchase other aircraft manufacturers to remain competitive in the transportation industry. Scenario 2. Auto manufacturer stakeholders would not be affected if regulation was unfavorable and limited possibility of mainstream acceptance and use.

9. This step would include some type of modeling regarding cause/effect of stakeholders actions, government actions, and other potential competitors who might enter the market.

10. Reassess steps 1-9 to see if anything has changed. Steps 1-9 would likely happen over a greater period of time where somethings may change. For example. government creates a new department to oversee and regulate personal aircrafts. That would drastically change scenario 2. Maybe advancements in alternative energy have shown ways to avoid using oil based energy, thus decreasing operating costs of personal aircraft.

One of the benefits to creating scenarios is to give an honest look at emerging technologies rather than off-the-cuff decisions about the practicality or future of a technology. Scenarios might also expose what the book refers to as weak signals - minor events or trends that may have a significant impact on the industry down the road. Good scenarios should likely result in some action of some kind from within the company due to the uncovering of emerging technologies or potential threats that otherwise would have gone overlooked. One of the greatest benefits to scenarios is that it keeps companies from failing to see emerging technologies or technological changes in their industry down the road. Just having these issues exposed can minimize resistance as well as allow management to prepare strategies based on several potential scenarios.